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Investing in cruise ship stocks
How to buy a possible comeback among pandemic-battered cruise line stocks.
As no-sail mandates sparked by COVID-19 tethered cruise ship lines around the world, the industry’s future seemed uncertain. But cruise ship stocks are poised for a healthy comeback as healthcare experts craft the framework for a safe return to sea.
What's in this guide?
What are cruise ship stocks?
Cruise ship stocks are ownership in companies that run cruise ships and transport passengers to their destinations while offering comfort and entertainment along the way.
Projected to be valued at $23.8 billion in 2021, the global cruise ship industry includes more than 270 ships powered by more than 50 cruise lines.
But three companies own about 75% of the market share: Royal Caribbean, Carnival and Norwegian. The first two pay dividends to shareholders.
How to invest in the cruise ship sector
There are several ways you can get your feet wet with cruise line investing. You can buy shares of individual cruise stocks. Or you can purchase shares of an ETF that invests in multiple cruise ship stocks and possibly other stocks in the travel industry. Here’s how to start:
- Choose a stock trading platform. You have plenty to choose from, so be sure to compare your options to find the one that works best for you.
- Open your account. Be ready with your ID, Social Security number and bank account information.
- Fund your account. You’ll need to transfer money to your brokerage account before you can start investing. Some platforms let you start with as little as $1.
- Search for stocks. Look up stocks by ticker symbol or use a stock screener to filter the types you’re interested in.
- Place an order. Once you’ve found an investment you want, specify how much of it you wish to purchase and submit your order.
- Monitor your investments. Track the performance of your portfolio by logging on to your account.
What stocks are in the cruise line sector?
Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn't include every stock available.What ETFs track the Cruise Ship sector?
You can also invest in ETFs that hold cruise ship stocks along with equities from companies in other industries. Here are some to consider:
- The First Trust Consumer Discretionary AlphaDEX Fund (FXD)
- Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD)
- Invesco S&P 500 High Beta ETF (SPHB)
- Pacer Lunt Large Cap Alternator ETF (ALTL)
- ProShares Equities for Rising Rates ETF (EQRR)
- VanEck Vectors Africa Index ETF (AFK)
- SPDR S&P 500 ETF Trust (SPY)
- iShares Core S&P 500 ETF (IVV)
- Vanguard Mid-Cap ETF (VO)
- Vanguard S&P 500 ETF (VOO)
Why invest in the cruise ship sector?
Cruise stocks can surge in strong economies when people have more disposable income to travel. In fact, prior to 2020, the cruise ship business was one of the fastest-growing sectors in the travel industry.
In 2018, the global cruise ship industry was valued at about $150 billion.
In 2019, it generated $5.5 billion in economic activity in the US alone, marking a 5.3% increase from 2018, according to the Cruise Lines International Association (CLIA), which represents most of the globe’s cruise ship companies.
This was fueled by a spike in people looking to take cruise vacations. In 2019, more than 1.37 million people boarded cruise ships that took off from US ports. That translated to an 8% increase from 2018 and a 26% increase from five years prior.
But downturns in the global economy and the wider travel industry can cause cruise stocks to take a major plunge.
What unique risks does the cruise ship sector face?
The cruise ship industry is connected to a wide variety of industries that help keep it afloat. For instance, cruise ships need large amounts of fuel to operate. If volatility erupts in the energy sector and fuel prices rise, it may take a toll on the earnings of cruise line companies. In fact, there are many sectors with the potential to impact cruise ship stocks:
- Industrial
- Food and beverage
- Apparel
- Tech
- Hospitality and leisure
- Arts and entertainment
- Finance and insurance
And of course, travel restrictions mean fewer people on cruise ships and less money in the pockets of cruise companies — as made evident by the COVID-19 pandemic.
COVID-19 took its toll on a broad range of businesses across the globe, but one of the hardest-hit sectors was the cruise line industry. Following a “No-Sail Order” in March 2020 from the Centers for Disease Control (CDC), many cruise lines found themselves struggling to remain afloat. In fact, Carnival, Norwegian Cruise Line Holdings and Royal Caribbean Cruises each saw sales sink by at least 65% across the first nine months of 2020.
That said, with the 2021 nationwide vaccine campaign well underway, the CDC has stated that Americans are safe to travel domestically if they’ve received their COVID-19 vaccination. And things are looking up for cruise line stocks. Major players in this sector have already begun the slow process of pandemic recovery. And some stocks, like Lindblad Expeditions Holdings, have regained everything lost through 2020 and then some — now trading near an all-time high.
The pandemic demonstrated that no sector is immune to loss: and cruise ship stocks lost a lot. But this sector is working hard to regain its losses and has already initiated the slow climb of recovery.
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To invest, you’ll need a brokerage account. Explore your options below.
*Signup bonus information updated weekly.
Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.
Bottom line
Cruise ship stocks are swimming through rough waters after enjoying the high seas. The sector took a major hit from COVID-19, but evidence suggests the industry is working diligently with healthcare professionals to recover. The extent to which it recovers, if at all, is uncertain.
Depending on the type of investor you are, this may look like and immense risk or an opportunity. It’s important to do your due diligence and carefully analyze cruise ship stocks and your own risk tolerance before investing.
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